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European Commission launches sector inquiry into e-commerce as part of a wider strategy to boost the European single digital market

May 2015 - Geo-blocking and other restrictions to passive sales are expected to be among the main targets of the investigation.

On 6 May, the European Commission officially launched an extensive antitrust review of the e-commerce sector in the European Union. The so-called “sector inquiry” aims at establishing the prevalent commercial conditions and patterns of online trade across the 28 Member States.

The European Commission is concerned that certain contractual arrangements between manufacturers, wholesalers and e-commerce retailers may artificially raise barriers to cross-border sales of consumer goods and services. Geo-blocking, re-routing, and other subtle forms of restrictions to passive sales, as well as the role of branding in market segmentation, are expected to come under scrutiny. The European Commission would like to understand how widespread such arrangements are and what their effects are on intra-community trade, free competitions and consumers.

Among the product segments that the inquiry will likely look at are electronics, clothing and shoes, books, digital applications and digital content (films, music, etc.). The choice of these segments is in a way natural, given that those are the products that consumers would most often arbitrage for between online platforms in different European countries. On the other hand, some of these segments have already attracted regulatory attention. For example, Amazon’s e-book pricing and other distribution terms became subject to scrutiny both at the EU level and in Germany. The European Commission and national competition authorities have been considering restrictions to unsolicited requests by customers to purchase a product online (so-called “passive sales”) as a serious competition law infringement for a number of years now.

Next steps in the sectors inquiry

In public statements, the European Commission has indicated that it will be sending out detailed questionnaires to a range of stakeholders across the European Union, including manufacturers, wholesalers, e-commerce retailers and trade associations, in the next weeks. The recipients will have to provide complete and accurate information in response, otherwise they risk a fine of up to 1% of their total turnover in the preceding business year.

A preliminary report on the outcome of the investigation is expected by the middle of 2016. Following a public consultation on the preliminary report, the European Commission plans to publish the final report in the first quarter of 2017.

Depending on what feedback companies and trade associations provide, the European Commission and the relevant national competition authorities may decide to open follow-on investigations against individual market players.

The sector inquiry as part of the European Union’s overall plan to expand its digital economy

The sector inquiry is being launched as part of the European Union’s broader plan to reinvigorate its digital economy. In a strategy paper released also on 6 May, the European Commission pinpoints a number of measures to that effect. Among them are:

harmonisation of the contractual rules for online sales and of the enforcement of consumer protection legislation across the EU

measures to cope with the excessive prices of cross-border parcel deliveries

modernisation of the European copyright legislation

simplification of the VAT regime for cross-border sales

measures for ensuring better security and mobility of data in the cloud.